CHAPTER 3 :

BUSINESS OWNERSHIP
 FACTORS IN SELECTING A BUSINESS
OWNERSHIP
Factors Example

1.Capital •If the individual possesses a small amount of capital,

he should venture in
a sole proprietorship.It because the cost forming
company is relatively
high.
•Capital also determines the probabilities to obtaining
credit or loans from external sources.
2. Personal •Personal assets are liable to the creditor if losses are
assets incurred either in a sole proprietorship.
•Companies is a separate entity.

3. Span of control •Sole proprietorship have full power and authority in

4. Sharing of information
carrying out his business.
•In a partnership, the span of control is shared among
all partners.
•If an individual decides not to share information
with his counterparts, it is advisable to form
proprietorship.
•In partnership, no confidential information among
partners, members of the company or creditors.
Types of Business Ownership and
characteristics
 Business ownership in Malaysia can be categorized into
four types
 Businesses established under the Business Registration Act
1956 (Amendment 1978) and the rules of the Registration
of Businesses Act 1957.
 Businesses established under Company Law 1965
 Businesses established under Co-operatives Act 1948
 Businesses established under Parliament Act and State
Government Enactment.
 Types of Business

1.Sole Proprietorship
2.Partnership
3.Private Limited Company
4.Public Limited Company.
 1. Sole Proprietorship

 Section 4, the Business Registration Act 1956

defines a single business as a business
established, owned, financed in terms of finances
and management handled by a single individual.
 It usually involves a small-scale business.
 Examples of business sole proprietorships are
tailors, beauty salon, convenience store and
laundry.
No Features Description

1 Possession (pemilikan) Sole proprietorship owned and operated by

one person only

2 Establishment Business established under Business

Registration Act 1956 (Amendment
1978)

3 Registration Ease to register

4 Capital Require a small capital

5 The distribution of profits Owner will own and bear all profits and
and losses losses derived from business.

6 Business period / life Business life is not guaranteed.

Dissolution would happen if a disaster
upon the owner
Advantages / Merits and Disadvantages
Demerits Sole Proprietorship Business
Advantages Disadvantages

Easy to manage Limited capital

formation and dissolution is easy Liability is not limited to -personal

property can be used to cover
liability

Business profits will be the overall Business Development limited -

owner depending on the owner

This business is not subject to Business life is not stable /

government regulation and vulnerable
legislation
 2. Partnership
•According to section 3, the Partnership Act, defines a partnership as the
relationship that exists between those who do business with for profit.

Merits Demerits

Ease of establishment The action of a partner can involve

all the partners.
easy to get credit financing Capital is still limited.

More capital resources than sole The existence of non-permanent

proprietorships partnership.
Business risk is spread Prone to misuse power

The burden of income tax is low Simple occurrence of conflicts

between partners.
Established division of labor and
specialization
Limited liability of limited
partners.
(According to the total capital
partners)
No Features Description

1 Possession This business is owned by more than one and not more than 20 people.
Form of business professionals such as legal services, accountants and
architects, the membership can be increased up to 50 people.

2 Establishment Registered pursuant to Business Registration Act 1956. Business

establishment must comply
matters which are under the Partnership Act 1961.
avoid any confusion or misunderstanding, between partners is good if
held Deed or the Partnership Agreement Contract

3 Registration Establishment of business is simple

No Features Description

4 Capital Partners do business together and

share capital. Total capital
contributions by partners are
determined based on the
discussions between them.

5 Profit & Loss According to the Partnership Act

Distribution 1961, all gains and losses earned
business by them must be divided equally
between the partners.
In addition, the ratio can be
determined by agreement between
the partners.
6 Business Life Business life is not guaranteed. It
can be dissolved if one partner
dies, retires, on the instructions of
the court or the expiration of a
contract
 3.Limited Company

Company Limited under

discussion here is a Company
Limited by shares.
It consists of two types: Private
Limited Companies and Public
Limited Company
 Private Limited Company
NO FEATURES DESCRIPTION

1 Possession The company may be formed by two persons

and a maximum of 50 students only

2 Establishment This business establishment must comply with

the matters covered under the Companies Act
1965. States must use the word "Sdn" or
"Limited" at the end of its name.

3 Registration Business establishment is more difficult

compared to other business. Establishment
procedures must comply with the subject
matters under the Companies Act 1965. It has a
foreign name in its own name
4 Capital The accumulated capital of the Company
limited is greater than other types of business.
Capital raised through stock issuance. States
should not make an invitation to the public for
subscription of any shares.
NO FEATURES DESCRIPTION

4 DESCRIPTION All profits are the property of the

company. Shareholders will receive
distribution of profits through dividend
payments

5 Business Life Business life is more secure. It does not

depend on the members where the
business will continue to exist despite
changes in the death of a member
Private Limited Company Advantages/Disadvantages
Advantages Disadvantages

Easy access to financial resources Company shares can not be trade in

through changes of ownership of the stock market.
shares or financial institutions.

Shareholders are not burdened with The Company is subject to tax

business management business

Liability of members of the company Financial statements must be audited

is limited to the capital contributed. by an auditor of a person appointed
and the documents must be complete
and updated

Business span does not depend on People can know the financial affairs
the age of its members. of the company.

The Company may sue and be sued in The high cost of establishment
its name because it is a separate
entity

These companies must comply with

all provisions of the Companies Act
1965
 Public Limited Company
 Characteristics of a public limited company is quite similar to the
characteristics of a Private Limited Company.
 The difference is in terms of business ownership.
 There is no limit for those wishing to become members or
shareholders of the company of this type.
 According to the law, at the end of each name of a public limited
company must be written the name “Berhad".
 Shareholders are free to buy and sell shares on the stock market
without the need for approval from anyone.
 Other matters such as formation, company registration, distribution of
profits and business is the same life expectancy as a Private Limited
Company.
Public Limited Company Advantages and
Disadvantages
Advantages
Easy to raise capital through the
issuance of more shares to the public.
Business is a more permanent
existence.
Stock performance easily transferable
Business activities may be conducted
on a large scale. (Economies of scale)
Liability incurred by the members is
limited.
Disadvantages
Establishment of a public limited
company is more complicated and
expensive.
Business management is more
complicated. This is because it is
regulated by law.
Possession and management are
separate
Bear a high tax
 Sole proprietorship and partnership
registration
 The prohibition imposed on the use of names using the word "National", "ASEAN",
"Royal" and others.
 Second: Applicants complete and submit Form P NA 1A To Register Business.
 The applicant shall submit the information and personal details
 For a partnership, all partners of the information to be filled.
 Certificate of registration certificate issued within seven days after the Form A
was submitted.
 This certificate must be displayed at a business address.
 Failure to do so allows the business owner a fine.
 Applications should be made to renew the certificate each year using Form D.
Changes in business information -Form B (P. NA 2)
 For owners who wish to change any information in the Form A as name, address
and type of business, they must fill in Form B (P. NA 2) and inform within seven
days of it happening
 Private Limited Company Registration
 First: Apply for permission to use the proposed business name -Form 13A
 Applications should be made to suggest the company name using the Form 13 A in
duplicate to the Registrar of Companies.
 The proposed name must be one hundred percent in Malay or English and not exceed
50 characters including the word 'Limited'.
 Second: Provide the following documents as soon as the establishment of the company
name approved by the Registrar of Companies- This document must be submitted
within three months from the date of approval.
 Memorandum of Company -Document that will inform the activities of the company
and the powers and limitations.
 Articles of Association, document that outlines the internal management policy and the
rights and responsibilities of the Board of Director
 Form 6 -Statutory Declaration of compliance of all regulations
 Form 24 -Form fraction of shares allocated
 Form 44 -Notification of a registered office address
 Statutory Declaration Form 48A, before the appointment of a director or promoter.
 Form 49 -Statement of particulars of Directors, Managers and Company Secretary
 Form 9 -Certificate of Corporation Account
 The applicant must pay the registration
 -payment amount depends on the authorized share capital